Tuesday, October 18, 2005

Smaller government appropriation from our hard-earned income = Greater individual freedom where to spend or save their hard-earned money.

Smaller government restrictions in movement of goods, services and people = Greater individual freedom where they will work, invest, trade, travel, rest and retire.
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In the beginning of human civilization, at primitive hunting societies, men learned to trade with each other. The animal hunters traded their excess animal catch with fish hunters for the latter's excess fish catch. Or traded with craftsmen for the latter's carpentry, musical instruments and other artistic services. Or traded with early farmers who practiced the early technologies of agriculture. Thus, men invented the MARKET for the exchange of goods and services, and it went well. There was no government then made up by full-time administrators and enforcers of mutually-agreed rules.

Later as population and economic activities expanded, market failures arose - monopolies, oligopolies, externalities associated with production like pollution, dealing with criminals and other deviants that disrupt social order and threaten property rights, dealing with external aggressors, etc. So men invented GOVERNMENT. And government invented TAXES and various fees. Initially it went well.

Later, governments introduced government failures and inefficiencies - bureaucratic red tapes, corruption, excessive tax rates, excessive trade barriers, state-sponsored monopolies, etc. So men invented non-profit organizations, more commonly referred to as non-government organizations (NGOs) and civil society organizations (CSOs). Initially it went well in attempting to reform government and state failures.

Later, it became evident that "reforming government" has become an oxymoron. Bureaucracies, once created, seldom decline, let alone die. In fact, governments later invented habitual BUDGET DEFICIT Many politicians run for government positions not to reform government but to maintain, if not worsen, those state failures.

Some groups went extreme and invented communist parties and socialist parties, to make an already super-imposing state become a "Big Brother" interventionist socialist state, supposedly to "centrally plan" the basic needs of its people. Later, many socialist states could not even plan and produce how many tons of bread and rice, how many million liters of gasoline, how many pairs of jeans and shoes, will be needed by their people. Scarcity led to political instability which later led to collapse of many socialist governments, from the Soviet Union to Eastern Europe. The remaining socialist states (China, Vietnam, Cambodia, etc.) survive because they have allowed the market system to exist in the economic sphere while maintaining political monopoly.

Why reform government when markets can do the delivery of some public goods and services more efficiently?

Why reform government when some government functions can be privatized?

Why keep high and complicated taxes when many citizens are privately paying for services that should have been done by government, but failed to deliver because of government failures?

Why let government bureaucrats and politicians decide how much they should appropriate from our hard-earned income and wages, and where they should spend our hard-earned money, including how much to pay for themselves, their travels and their parties?

In the case of the Philippines, why should the productive sectors be heavily taxed, even harassed by tax administrators -- the Bureau of Internal Revenue (BIR), Bureau of Customs (BOC), etc. - when the former seldom or do not send their children to public schools, do not go to public hospitals when they get sick, spend a big sum to live in gated villages for their personal protection, pay for the maintenance of their villages' street lighting and garbage collection? These services are long-held and believed to be "public goods" and hence, should be provided by the state. But many of these services are now provided by the private sector.

We, members and supporters of Minimal Government movement, believe in the following philosophies and principles:

a. Shrink the size of government and this will reduce corruption in government. If there is less to steal, less stealing will happen. If there is less power to wield unjustly, less power will be wielded unjustly.

b. Reduce tax rates and this will reduce corruption in tax collection. If there is less taxes to pay, less tax evasion will happen.

c.. Lessen "free riding" in benefits that other people have paid for. People should pay for services that they enjoy and benefit, whether publicly or privately provided.

d.. Should government be involved in delivery of social services, the task should be given to local government units (LGUs) and less to national government agencies.

e.. Optimize individual freedom to choose, to trade, to travel, to be happy. The privilege of selling to whomever wants to buy and to buy from whoever want to sell is basic human right and human freedom. To restrict who can sell to whom and who can buy from whom is a violation of such human rights.

To achieve these ends, we seek to advocate and campaign for the following basic measures:

1.. Merge line departments when their functions tend to overlap or occasionally conflict. Out of current 21 Departments, we believe these can be reduced to only 13 or 14. (See a discussion paper on "Merging Some Line Departments for Expenditure Reduction and Making the Philippine Bureaucracy More Efficient"). Corollarily, some bureaus and attached agencies under those
departments can be merged, if not privatized.

2.. Corporatize, if not privatize, up to 90 percent of the current 120 state universities and colleges (SUCs). Government should re channel revenues and savings from this move to improve public elementary and secondary education, and to expand scholarship opportunities to poor but intelligent tertiary education students. After all, the really poor students do not reach college. They drop
out even before they finish elementary or high school.

3.. A flat individual income tax rate of only 10 percent, versus the current 6 tiers, from 10 to 34 percent. A lower corporate income tax of 16 percent of net income, versus the current 32 percent. Theoretically, we believe that income taxes can be abolished, and government can shift to consumption tax. You buy a car or house, you pay tax. You buy gasoline or hamburger, you pay tax. You buy clothes or shoes, you pay tax. But in consideration of the swelling public debt and perennial budget deficit, we settle for a 10 percent income tax flat rate.

4.. Encourage the poor and those in the informal sectors to pay taxes. It is them who mainly benefit from public education, from public health care, from public safety. Many poor people have money to bet in jueteng, cockfighting and other forms of gambling, have money to buy beer and cigarettes, gin and local alcoholic drinks. Hence, they should pay taxes where they themselves will benefit from basic public services.

5.. Privatize a big portion of current public forest land. The government has terribly failed in protecting public forest land, currently constituting 50 percent of the country's total land area of 30 million hectares. Sell some of those public forest land, tax the new private landowners, while holding them accountable against activities that cause heavy environmental damage – rapid soil erosion, forest fires, uncontrolled mining tailings, etc.

6.. Corporatize or privatize other idle and underutilized resources - including police or military reservation areas. If these are military areas for instance, proceeds from such revenues should be devoted only to modernize the Armed Forces and to retire some maturing domestic debts. Savings from interest payment can be used to increase the pay of uniformed personnel.

7.. Liberalize further international trade. Trade protectionism benefits a few local producers and their workers but penalize the majority of the population. Savings by consumers from cheaper and/or better quality imported goods and services create additional demand on other goods and services, which create new business and employment opportunities which can more than offset business and employment displacement in the affected sectors.

8.. Liberalize further foreign investments into the country. It is better to bring foreign investors and businessmen into the country, than sending Filipino workers to foreign lands. Because of fast population growth and not so good educational system, labor supply always outstrips labor demand annually in the country.

9.. Deregulate sectors where monopolies and oligopolies thrive, where tentacles of government regulations kill entreneurship. The local shipping industry should be deregulated and liberalized to allow competition by foreign shippers, to give justice to local producers who complain of high rates imposed by local shipping monopolies and oligopolies, not to mention government red tapes.

10.. Support the move towards strengthening the LGUs through federalism.

We are NOT advocating a "Zero Government", though. Economic and political theories, as well as practicalities of daily lives, prove that there is role for government. Thus, we believe that there is room for government regulation and intervention in these areas, among others:

1.. Administration of justice, of upholding basic human rights against threats to life and property. This include functions by the Department of Justice (DOJ), the police (PNP), the Judiciary (Supreme Court and lower courts).

2.. National defense against potential external aggression. The Armed Forces of the Philippines (AFP) can be reoriented to focus on air and naval defense. Fighting the communist insurgents, smugglers of prohibited goods (bombs, illegal drugs, etc.) and Muslim extremists is better handled by the PNP and local government units (LGUs).

3.. Basic education (elementary and secondary) and health care for the poor. But these should better be done more by the LGUs and less by the national government.

4.. Infrastructure development where there is little or no private sector interest. This includes power development, public works, transportation and communication facilities.

This is a tall order and a big challenge for us all. We expect public support, especially the middle class and salaried employees, for these reform measures. Reforms not only in governance, but also in our philosophy and concept of the role of governments, in the limits to their intervention, in our lives.